Quest Diagnostics Dodges Antitrust Class Action

SAN FRANCISCO (CN) – A federal judge has again dismissed an antitrust class action claiming Quest Diagnostics monopolizes medical testing in California. Lead plaintiff Colleen Eastman sued Quest earlier this year, accusing the company of monopolizing medical testing in Northern California by paying kickbacks to doctors and insurance companies in order to suppress competition. U.S. District Judge William Orrick dismissed the original complaint this past June, finding that the plaintiffs had not established standing because they did not allege facts demonstrating that they had been harmed by Quest’s anticompetitive conduct. The plaintiffs amended their complaint, but a hearing in September led Orrick to dismiss the amended complaint on Nov. 25. According to Orrick’s ruling, the amended complaint identified the same two markets – the plan/outpatient market and the physician billing market – and three exclusionary practices – kickback and leveraging, collusion and acquisition – as the original, but its most significant additions relate to monopoly overpricing and standing allegations. The amended complaint included new data intended to improve monopoly pricing and an claim that the plaintiffs have standing because they have “suffered antitrust price injury due to Quest’s overcharges” and that Quest’s prices “caused plaintiffs to pay a higher amount than they would have paid absent Quest’s anticompetitive conduct.” But Orrick found the three allegedly exclusionary practices insufficient to support the monopolization claims. The plaintiffs’ expert analysis and data “is not enough to establish the causal antitrust injury that has been missing from their kickback/leveraging theory,” he wrote. “The analysis says little, if anything, about Quest’s pricing as an individual entity,” he continued. “Both of the charts in the first amended complaint are derived from data concerning all routine diagnostic testing in the plan/outpatient market in Northern California, not Quest’s routine diagnostic testing.” (Italics in original.) The plaintiffs’ allegations regarding Quest’s “substantial economies of scale” and “cost advantages do not indicate that Quest uses its alleged monopoly power to overcharge in the patient/outpatient market,” Orrick wrote. “To the contrary, they indicate that Quest underprices its competitors in that market, much as plaintiffs explicitly allege that it does in the patient billing market,” he said. Orrick also called the plaintiffs’ allegations about Quest’s use of market power for payback “conclusory and speculative” because they are “focused on what monopolists in general ‘invariably’ do, not what Quest itself actually does.” “In sharp contrast with plaintiffs’ detailed allegations regarding Quest’s underpricing, their allegations of monopoly overcharging are devoid of factual support,” he said. (Italics in opinion.) Moreover, “plaintiffs do not explain why it is appropriate to assume that any level of above-average pricing in this region is attributable to Quest’s alleged antitrust violations,” he said. The judge also dismissed the allegations supporting a theory that Quest colluded with the health plans Aetna and Blue Shield. “As has now been explained in four separate orders dismissing claims based on the Aetna and Blue Shield agreements, an exclusive dealing arrangement does not violate the antitrust laws unless its probable effect is to foreclose competition in a ‘substantial share’ of the relevant market,” he said. He also dismissed the plaintiffs’ claims under their acquisition theory, which was based on Quest’s acquisitions of Unilab, Berkeley HeartLab and Dignity Health over the past 13 years. “I do not doubt that, at some point, a series of even relatively insubstantial acquisitions creates cause for concern under the antitrust laws,” Orrick said. “Here, however, plaintiffs fail to plausibly allege any specific anticompetitive effects of any of the three acquisitions, whether viewed in isolation or in combination.” Orrick gave the plaintiffs until Jan. 8 to amend their complaint. Quest attorney Richard Raskin, of Sidley Austin in Chicago, told Courthouse News, “We’re pleased that the court has found, for a second time, that the plaintiffs have not stated an antitrust claim. We believe the judge’s opinion is correct and that plaintiffs do not have a claim against Quest Diagnostics.”